Paul Krugman On The 'Policy Malpractice' That's Doing 'Double Damage' To The American Economy

In his latest column,
Paul Krugman discusses a theme that we're pretty fond of
around these parts: The disconnect between the belief that the
government has expanded wildly under Obama, and the reality,
which is that government spending has fallen in a way that's
quite unusual for an economy trying to recover.

The key, of course, is that the fall in government spending is
the result of state and local cuts, which people will say is not
the result of any administration policies: And that may be true,
but it doesn't change the economics.

Start with government employment (which is mainly at
the state and local level, with about half the jobs in
education). By this stage in the Reagan recovery, government
employment had risen by 3.1 percent; this time around, it’s down
by 2.7 percent.

Next, look at government purchases of goods and services (as
distinct from transfers to individuals, like unemployment
benefits). Adjusted for inflation, by this stage of the Reagan
recovery, such purchases had risen by 11.6 percent; this time,
they’re down by 2.6 percent.

Krugman argues that if you assume government spending growth like
Reagan had, you'd get another 1.3 million jobs, and an
unemployment rate sub-7%.

This policy malpractice is doing double damage to America. On one
side, it’s helping lose the future — because that’s what happens
when you neglect education and public investment. At the same
time, it’s hurting us right now, by helping keep growth low and
unemployment high.